In the wake of the financial crisis of 2007-2009, the Basel Committee on Banking Supervision (BCBS) faced the critical task of diagnosing what went wrong and then updating regulatory standards aimed at preventing it from occurring again.  In seeking to strengthen the microprudential regulation...

Hedge funds rely on “prime brokerage” units within banks to provide leverage. With the enhanced capital requirements and new liquidity standards introduced by Basel III driving up the cost to banks of engaging in such financing, prime brokers have begun to offer an alternative means of...

After the Basel Committee on Banking Supervision (BCBS) introduced the Basel III framework in 2010, individual countries confronted the question of how best to implement the framework given their unique circumstances.  Switzerland, with a banking industry that is both heavily concentrated and...

When Lehman Brothers Holdings, Inc. (LBHI) sought Chapter 11 protection, the more than 6,000 counterparties with which its subsidiaries had entered into over 900,000 over-the-counter (OTC) derivatives transactions faced the question of how best to respond to protect their interests. The...

For financial regulators seeking to use regulatory requirements to manage risk in a banking system, there can be a concern that such requirements crowd out efforts by banks to develop their own risk management systems.  One way in which regulators have attempted to solve this problem is to...

From the earliest efforts to mandate the amount of capital banks must maintain, regulators have grappled with how best to accomplish this task. Until the 1980s, regulation had been based largely on discretion and judgment. In the wake of two bank failures, the central bank governors of the G10...

Ten years after the Federal Reserve's crisis-era bank stress test, it is time to recalibrate the stress tests for “peacetime.” Outside of a crisis, supervisors should tailor stress tests to focus on their comparative advantages by taking a macroprudential focus, with severe scenarios that...

Banks have a private motive to hold some level of cash and liquid reserves, but the negative externalities of bank runs create a public interest in setting a regulatory level higher than the privately optimal level. We can think of such reserve requirements (RRs) as the original form of...

This paper surveys 10 blanket guarantee (BG) programs across 13 Key Design Decisions. The defining characteristics of these programs in terms of their inclusion in our BG series are (a) that they guaranteed a broader range of liabilities beyond deposit accounts and (b) that the guarantees...